Between 2015 and 2020, only 2.4% of all U.S. venture capital raised was distributed to Black and Latinx founders, according to an analysis by Crunchbase.
But it isn’t for a lack of Black and Latinx founders, or shortage of interest in investing in underrepresented groups. Rather, in the early stages of funding –– when shared experiences and culture can be as important as business plans and total addressable markets –– there is a mismatch between founders and funders, say Ivan Alo and LaDante McMillon, co-founders of New Age Capital.
The duo, who met during freshman orientation at Boston College, initially took different paths: LaDante poured his passion for storytelling and video into brand development and marketing, while Ivan put his finance degree to work as a portfolio manager at a real estate investment firm and early team member of a real estate technology platform.
They eventually came back together in 2014 to create a fintech company focused on saving and financial literacy. When their own experience raising capital proved frustrating, they pivoted –– launching New Age Capital in 2016 to provide early-stage funding and support to technology and tech-enabled companies led by Black and Latinx entrepreneurs. Working as scouts for Lightspeed Venture Partners, they invested in a dozen companies with a $500,000 pilot fund and are now raising their first institutional fund.
We sat down with LaDante and Ivan to talk about why culture and community are as important as capital when it comes to supporting Black and Latinx entrepreneurs.
What were the biggest barriers you saw as Black entrepreneurs?
Ivan: I guess you could call it external obstacles, which had nothing to do with how we were building the company and had a lot to do with how we would finance it. We’re always trying to learn from the best in order to make the path easier for ourselves, so initially we tried to find people who looked like us and had raised millions of dollars in venture capital for a fintech product. We realized there was no one at the time.
Then we looked on the other side of the table, at the people whose help we needed to raise capital. We couldn’t find anyone who, we felt, had empathy for the fact that we didn’t look like the norm or have the traditional backgrounds expected of successful VC-backed founders.
As a result of us helping other Black and Latinx founders navigate the same barriers we faced, the idea to start our own firm came from a friend. We initially laughed at the idea because we were two young black men with a bunch of college loans and full-time jobs, and we’d only had uncomfortable experiences in the VC world. But after much thought and deep discussions over several months, we took a step back and realized that there was a real opportunity to create something unique.
Can you elaborate on that opportunity?
LaDante: We aren’t focusing specifically on Black and Latinx entrepreneurs catering solely to Black and Latinx customers. Instead, there is a group of world-class entrepreneurs building high growth, venture scale businesses who have received almost no investment capital historically, and there are only a few firms focusing exclusively on these entrepreneurs, especially in the seed stages.
Being acutely aware of this, we've created a brand that's authentic, transparent and empathetic, allowing Black and Latinx entrepreneurs to feel like they're represented in the venture capital space. When we get on a call, they breathe a sigh of relief because they can be their own authentic selves, and that frees up space for them to focus on explaining to us what they’re trying to build.
Ivan: It’s a big misconception that these founders are only building products for their communities, which is not true. A lot of the founders we’re connecting with are building products in markets that have nothing to do with how they look or what they consume.
Why is culture and shared experience so important?
Ivan: It becomes extremely tiring as an individual –– Black, white or whoever –– to not be authentically yourself.
Your primary role as the CEO and founder of a company is to set the vision and make the best decisions to move that mission forward. It is very difficult to do that when you are not being authentic to who you are because you're not making the right decisions that you should make for the vision that you initially set. You're thinking too much about what other people think. It’s like you're creating another job for yourself. It's a really inefficient way to build a business.
And ultimately the stakes are a lot higher when you are the founder and CEO of a company, right? When you're code switching and in a role as an employee, you can still remove yourself and recharge. You don't really get that opportunity as a founder. You have employees relying on you. You have customers relying on your product. You have investors looking to get a return. You can't ever really turn it off.
What was the initial response to New Age Capital?
LaDante: There were people who told us we would never raise a penny, or that we should go work for free for someone first because we didn’t have traditional venture experience. We heard some pretty harsh things; a lot of people couldn’t see the opportunity because they have been conditioned to believe it doesn’t exist. Now we're seeing similar firms pop up everywhere, but in the beginning that skepticism is what motivated us to think we were actually on to something.
How did you connect with Lightspeed Venture Partners?
LaDante: We met Barry Eggers in April 2017 at the National Venture Capital Association annual meeting in Washington, D.C. (he currently serves as the Chair of the NVCA Board of Directors). He was speaking on a panel, and Ivan asked a question about the secondary market that was applauded. After the panel, one of our contacts said we needed to talk to Barry. Being that we’re normally the best dressed in the room, one of the first things he commented on was Ivan’s socks; they were both wearing crazy socks.
The conversation moved to how Barry doesn’t like the term "unicorns" because they are imaginary animals, which signified unrealized returns. Rather, he likes using "narwhals" because they’re real animals, and he likes real returns. After the meeting we found him some socks with narwhals on them, and that spurred the relationship, which ultimately led to us working on a pilot fund with Lightspeed as our sole LP. We invested in 12 companies and had the opportunity to really hone a few skills and better understand how we should be evaluating companies from a venture perspective.
What do the companies in your portfolio have in common?
Ivan: A lot of the founders that we invested in are highly autonomous, acutely self-aware, and have clarity on how to build their companies to be successful. The thing they need is capital. Black and Latinx founders typically take about two to three years to just get over the million dollar hump. What we want to do is write them a big enough check so that they can get to that point in months, not years.
LaDante: We’re finding entrepreneurs in St. Louis, Chicago, Miami and Minneapolis. A lot of these businesses are actually a lot further along than your average seed-stage business in Silicon Valley that's receiving $3 million to $5 million just to get the idea out of their head. A lot of our portfolio companies are already generating revenue, or at least some traction before they receive an investment from us.
What’s next for New Age Capital?
LaDante: We want to take everything we’ve learned and the relationships we’ve built these last five years to become the best seed-stage firm in the market while doubling down on the strategy we used as scouts for Lightspeed: investing in the best Black and Latinx founders who are building tech companies and solving real world problems.
Ivan: The way we talk about it is that we’re creating the people’s VC. Regardless of your background, pedigree or network, if you're putting a product into the world that is solving a problem and the market is receptive to it, we want to help. Hopefully that will result in more jobs created and more wealth created for these communities. At the end of the day, we want to make the world a better place and have fun while doing it –– because otherwise, what’s the point?
The views of the interviewee of this article do not necessarily represent the views of First Republic Bank. This information is governed by our Terms and Conditions of Use.